Why You Might Be Interested In CEWE Stiftung & Co. KGaA (ETR:CWC) For Its Upcoming Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see CEWE Stiftung & Co. KGaA (ETR:CWC) is about to trade ex-dividend in the next four days. The ex-dividend date is one business day before the record date, which is the cut-off date for shareholders to be present on the company's books to be eligible for a dividend payment. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. This means that investors who purchase CEWE Stiftung KGaA's shares on or after the 6th of June will not receive the dividend, which will be paid on the 10th of June.

The company's next dividend payment will be €2.60 per share. Last year, in total, the company distributed €2.60 to shareholders. Based on the last year's worth of payments, CEWE Stiftung KGaA stock has a trailing yield of around 2.4% on the current share price of €107.20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether CEWE Stiftung KGaA can afford its dividend, and if the dividend could grow.

View our latest analysis for CEWE Stiftung KGaA

If a company pays out more in dividends than it earned, then the dividend might become unsustainable - hardly an ideal situation. Fortunately CEWE Stiftung KGaA's payout ratio is modest, at just 29% of profit. A useful secondary check can be to evaluate whether CEWE Stiftung KGaA generated enough free cash flow to afford its dividend. The good news is it paid out just 22% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings fall far enough, the company could be forced to cut its dividend. Fortunately for readers, CEWE Stiftung KGaA's earnings per share have been growing at 11% a year for the past five years. Earnings per share have been growing rapidly and the company is retaining a majority of its earnings within the business. This will make it easier to fund future growth efforts and we think this is an attractive combination - plus the dividend can always be increased later.

Another key way to measure a company's dividend prospects is by measuring its historical rate of dividend growth. In the past 10 years, CEWE Stiftung KGaA has increased its dividend at approximately 5.7% a year on average. Earnings per share have been growing much quicker than dividends, potentially because CEWE Stiftung KGaA is keeping back more of its profits to grow the business.

To Sum It Up

From a dividend perspective, should investors buy or avoid CEWE Stiftung KGaA? CEWE Stiftung KGaA has been growing earnings at a rapid rate, and has a conservatively low payout ratio, implying that it is reinvesting heavily in its business; a sterling combination. It's a promising combination that should mark this company worthy of closer attention.

Curious what other investors think of CEWE Stiftung KGaA? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.

If you're in the market for strong dividend payers, we recommend checking our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.